Disquiet over draft bill that proposes jail term for crypto users

June 10, 2019

New Delhi: A recent draft bill that proposes a jail term for anyone dealing in cryptocurrencies continues to cause a stir in India and in the cryptocurrency market around the world.

Bloomberg mentioned the jail term in a report on 7 June (bit.ly/2WQmKrM), following a 26 April report in The Economic Times (bit.ly/2K65l8w), which talked about the proposed legislation—Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019—being “circulated to relevant government departments”.

However, according to a right to information (RTI) request filed on 4 June by Varun Sethi, a lawyer specializing in blockchain, the Reserve Bank of India (RBI) says it is not in the know of the proposed ban (bit.ly/2XCs4fu).

The RBI, however, has not encouraged the use of bitcoins, and the sale of bitcoins currently is taxed in India. There are an estimated three million bitcoins in circulation in the country.

Regardless, cryptocurrency experts believe that fretting over the draft at this stage may not help. “It’s too premature to come to a conclusion on this,” said Vishal Gupta, CEO of many crypto-based startups, such as SearchTrade and Binex, citing that this is a private bill at the moment.

Gupta also said that while a section of the bill has been talked about, it actually says that illegal dealings in cryptocurrencies will be illegal —which is like saying paying rupees for illegal activities will be illegal.

Sathvik Vishwanath, CEO and co-founder, Unocoin, said he doesn’t think the bill will be able to stop the dealings in cryptocurrencies even if it does come into effect. “Transactions are completely online,” he said. “It’s impossible to tell where it’s happening from.”

According to Vishwanath, it would be a bad idea for the government to ban cryptocurrency in India, because it might drive transactions underground. As long as there’s a way to bring this money into regulated means, there’s a way to trace it and stop illegal activities, he said, adding that last December’s RBI order, which banned entities regulated by it to deal with, or provide services to individuals or businesses dealing in virtual currencies, a lot of people had moved their cryptocurrencies out of the country.

This seems to be an important point. Ashish Singh, CEO of bZird, a digital marketing firm, said many cryptocurrency users in India keep their money abroad. Singh, who is part of cryptocurrency groups on WhatsApp and has dealt in virtual currencies, said the bill may not hurt the “really big users”.

According to him, many Indian users don’t actually hold cryptocurrency accounts in their own name. Instead, they have friends in other countries who buy and sell currencies for them, and send the money through platforms such as PayPal.

A user on a cryptocurrency WhatsApp group called Crypto Tech Stories wrote: “So, as of now, if we want to get withdrawal, need to get it from someone in US or other countries.”

“Honestly, I don’t think the government will go this way. India is part of the G20, and countries within that have worked hard to regulate such currencies,” one person, who ran a cryptocurrency company in India, but had to shut it down following the RBI order, said requesting anonymity.